Property Market

Can owners of shopping centres or parades of shops restrict the (lawful) activities carried on by tenants without infringing antitrust law? In the UK, land agreements were, until April 2011, effectively exempt from the application of the antitrust rules. This meant that restrictions on use in leases were historically not subject to challenge on the basis that they infringed antitrust law (although there were cases alleging unlawful abuse of dominance by owners of ports, airports, motorway service stations and other 'essential facilities').

In a recent case, which is the first reported case on the application of the rules, the Central London County Court in the UK struck down a proposed restriction which would have prevented the sale of groceries, fresh food, beer, wine, spirits and other household products by a tenant (Martin Retail Group Ltd v Crawley Borough Council).

The dispute arose in the context of an application to renew the business tenancy of a shop which was being used as a newsagents and tobacconist, and had a post office counter as well. The tenant wanted to expand the range of goods that it was selling, in order to compete with a supermarket in the same parade, but the Council (which owned the parade of shops) refused.

The Council conceded that the prohibitions would restrict competition, but argued that the local community benefitted from the range of traders and retail outlets in the shopping parade and claimed that smaller businesses would be less likely to take a lease of premises in a parade where their trade was not protected, i.e. there were countervailing benefits which outweighed the anticompetitive effects.

However, the Court was not satisfied that, as a matter of fact, the distribution of goods was improved, or economic progress promoted, through the existence of a number of different retailers rather than via a supermarket or a number of similar retailers. Account had to be taken of the relevant market, which was identified as within a relatively short walking distance from the parade. The proposed restriction clearly provided a means of eliminating competition in convenience goods on the parade. On that basis, the judge agreed with the tenant that the proposed restriction would unlawfully eliminate competition in convenience goods in the parade.

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